What Does Chobani's Founder Get For Giving 10% Of His Company To Workers?

The founder of Chobani, the upstart Greek yogurt maker recently valued at as much as $5 billion, just committed one of the most selfless corporate acts of the year: he’s giving 10% of the company to its 2,000 or so employees. Some long-term workers could receive stock valued at $1 million or more, with stock amounts based on each employee’s seniority.

President and CEO of yogurt company 'Chobani' and founder of the tent foundation Hamdi Ulukaya speaks at the Creativity For Change Forum, part of Tallinn Music Week in Estonia, on April 1, 2016. Credit: RAIGO PAJULA/AFP/Getty Images

But the history of employee ownership in the U.S. suggests the founder, Hamdi Ulukaya, could be the biggest winner of all in the transaction. Why? Because employee-owned companies – even those with workers holding only a minority stake – tend to out-perform the competition. Ulukaya’s slightly smaller stake could potentially be worth much more, as Chobani’s workers adopt the habits of business owners: being highly productive; engaging in less friction between front-line workers and management; self-policing each other to reduce waste and errors; and offering up many helpful ideas.

Ulukaya’s fearless risk-taking and astute gauging of consumer tastes upended the U.S. yogurt market in recent years, with consumers stampeding away from blander products to the tangy Greek variety. Chobani quickly surpassed $1 billion in sales. And much of that growth occurred before the company took on any outside capital, keeping Ulukaya the sole owner and, on paper at least, an unlikely billionaire.

More established yogurt companies countered with their own Greek yogurt offerings, however, taking back some market share. And roughly a year ago some growing pains began to surface at Chobani. Ulukaya has turned down offers to acquire all or a controlling stake in the company. Instead, he wisely reached outside for help, bringing in high-level outside management, overdue systems to support the larger company, and a big round of capital to support growth.

Some observers may consider the awarding of 10% of Chobani’s stock to employees a gift for what’s already been accomplished – and, in part at least, it is. “I’ve built something I never thought would be such a success, but I cannot think of Chobani being built without all these people,” Mr. Ulukaya told The
New York Times.

But introducing employee ownership to the company could also be a major factor in securing its long-term success. Motivating employees in the slow-growth consumer products industry over time can be difficult. With unemployment low, attracting and retaining quality employees is growing more difficult. And as a maturing company, Chobani has much catching up to do in terms of installing systems, ensuring quality control and otherwise protecting its valuable market share. Worker-owners can be better counted on to rise to those challenges, I’m quite certain.

Don’t view Ulukaya’s move as a one-time generous giveaway, but rather as a strategic adoption (partial, for now) of an ownership format that positions Chobani to continue its impressive growth. Thankfully, he’s grasping the value of employee ownership. Late last year, the Texas supermarket chain H-E-B, already a cut above the competition in that market, announced it would distribute 15% of its stock to some 55,000 eligible employees. And some 7,000 other U.S. companies already enjoy the benefits of employee ownership. A list of the biggest is here.

Employee ownership, endorsed by both political parties in the country, makes industry more competitive and more robust. It is helping to solve the retirement savings crisis in the U.S. by out-performing other types of retirement plans. In short, it’s the best of capitalism, played as a team sport. That’s the significance behind Hamdi Ulukaya’s bold move at Chobani.

Mary Josephs, founder and CEO of Verit Advisors, led ESOP advisory at
Bank of America. You can reach her at CEO@verit.com.

I am Founder & CEO of Verit Advisors, a middle market investment banking firm. I have nearly three decades experience with Employee Stock Ownership Plans, and have advised, structured and closed more than 200 financings for companies representing more than $7 billion in ...